Sunday, Sep 21, 2014

India Inc profit set to grow, but margins under pressure

While the BSE Sensex is hitting a new peak almost every other day, investors are anxious if this portends a rise in future cash flows. While the BSE Sensex is hitting a new peak almost every other day, investors are anxious if this portends a rise in future cash flows.
Written by George Mathew | New Delhi | Posted: April 21, 2014 8:26 am

YET another earnings season is here. This time the announcement of financial results for the quarter ended March 2014 has coincided with the general elections and the resulting rally on the stock markets. While the Sensex is hitting a new peak almost every other day, investors are anxious if this portends a rise in future cash flows. What is in store for investors from companies looking at the fourth quarter results? The Indian Express sought the views of leading brokerages and research houses on the performance of India Inc in Q4 of FY14. Excerpts from their reports:

ANGEL BROKING
Angel Broking expects an improvement in earnings growth for Sensex as well as its coverage companies, largely due to healthy revenue performance in Q4. For Sensex companies, it expect earnings to grow by 8.7 per cent year-on-year (YoY) and 5 per cent quarter-on-quarter (QoQ) and for its coverage companies, it expects an earnings growth of 8.0 per cent YoY and 7.3 per cent QoQ. In terms of sector-wise contribution to earnings, it expects the bottom-line performance to be supported mainly by the export-driven IT and pharmaceuticals sectors.
On the revenue front too, the performance is likely to be driven by export-oriented companies. It expects Sensex companies to report a revenue growth of 12.2 per cent YoY and 5.7 per cent QoQ. Similarly, its coverage companies are expected to post an 11.8 per cent YoY and 6.0 per cent QoQ growth in top-line. IT and pharma companies, and Tata Motors in the automobile sector are expected to continue contributing to the overall revenue performance.
For this quarter the persistence of headwinds in cyclical sectors is expected to weigh on their margin performance. For the Sensex companies, it expects a margin contraction of 32 basis points YoY and for its coverage universe, it expects margins to contract by 13 bps YoY.
MOTILAL OSWAL

Motilal Oswal expects its universe of 148 companies (excluding three major oil marketing companies IOC, BPCL, HPCL) to report aggregate fourth quarter sales growth of 12 per cent YoY. The double digit growth in sales continues for the third consecutive quarter led by technology, oil & gas, healthcare and private banks. Earnings before interest, tax, depreciation and amortisation (EBITDA) margins have bottomed out. It expects Q4 EBITDA margin at 19.9 per cent which is slightly lower than long-period average of 20.5 per cent.

Companies within Motilal Oswal coverage universe are expected to report aggregate Q4 profit after tax (PAT) growth of 10 per cent YoY. This is lower than 15 per cent YoY witnessed in Q3 and the long period average of 14 per cent. Technology, telecom, healthcare and media are expected to report less than continued…

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